A real estate investor recently said she want to raise capital by selling membership interests in an LLC but didn’t know how to divide the membership interests appropriately. The answer is simple don’t.
With an LLC you do have several options–First you can divide up the LLC pie (so to speak) into Units–which are the equivalent of shares of stock in a corporation. For instance, Martha Stewards company issued LLC units when it went public . . . well you could have your LLC issue any number of units (say 1,000) and divide them up and for what ever price/consideration you wish as long as it is reasonable. There is also the more traditional way of looking at LLC ownership which is based on a partnership model of allocating percentages to each individual. If you are going to be using the LLC as a vehicle to raise money from third parties, the partnership/percentage method can become a real pain and you are better off simply issuing units. Contact me if you have any additional questions or concerns on these types of matters.
May 14th, 2010 at 2:00 pm
Why thank you I really appreciate it. If you have any other topics you want discussed or suggestions for postings feel free to let me know. I am always interested in what people are looking instead of throwing something against the wall and seeing what sticks.